In the matter of Aventus Holdings Limited and Aventus Capital Limited as responsible entity of the Aventus Retail Property Fund [2022] NSWSC 266

Affidavit evidence

1. Aventus relied on the affidavit dated 18 February 2022 of its solicitor, Mr Podzebenko, who addresses amendments that were made to the final draft scheme booklet prior to its registration with the Australian Securities and Investments Commission ("ASIC"), including an amendment made at the Court's suggestion to clarify the consideration that Aventus' managing director and chief executive officer would receive if the Merger (as defined in the scheme booklet) is implemented and several minor typographical amendments. He refers to the steps taken to provide the final scheme booklet to Aventus securityholders and to registration of that booklet with ASIC. He also addresses the announcement made by Aventus to Australian Securities Exchange ("ASX") on 21 January 2022 as to the number of Aventus securityholders which had elected to receive the HomeCo Scrip Consideration (as defined) alternative under the schemes, although recognising that that result was indicative only and the final elections would not be known until the scheme record date.
2. Mr Podzebenko also referred to Aventus' release to ASX, on 22 December 2021, of a letter from the independent expert confirming that the valuation of Aventus' portfolio did not change the independent expert's opinion that the Merger was fair and reasonable to and therefore in the best interests of Aventus securityholders and to the announcement of the results of scheme meetings to ASX on 25 January 2022. He also addressed the opening of a trust account to receive the scheme consideration, the publication of an advertisement of the second Court hearing, the identity of Excluded Securityholders (as defined) under the schemes and the question of waiver of a condition precedent under the Company Scheme relating to a class ruling to be obtained from the Australian Taxation Office, where a draft version of that ruling had been provided to Aventus on 18 February 2022.
3. By an affidavit dated 1 February 2022, Mr Aaron Calder, who is a senior client relationship manager with Link Market Services Ltd, referred to the steps taken in respect of the dispatch of the scheme booklet and scheme materials to electronic, postal and airmail recipients, a reminder email sent to securityholders, the receipt of proxies in respect of the scheme meetings and the manner in which the meetings were conducted. He also set out the result of voting by Aventus securityholders in respect of the meetings. Although the voting participation rate by number of securityholders was low, his evidence is that it was higher than the number of securityholders that had voted at annual general meetings of Aventus between 2019 and 2021.
4. By an affidavit dated 27 January 2022, Mr Bruce Carter, who is a non-executive director of Aventus and acted as chair of the scheme meetings, referred to the conduct of those meetings, the questions asked at those meetings and, helpfully, the answers which Mr Carter had given to those questions. He also outlined the results of voting at those meetings.
5. By his affidavit dated 28 January 2022, Mr Andrew Selim, who is the general counsel of the acquiring entity, referred to the outcome of a restructuring of that entity which was approved by the Court on 14 December 2021 and implemented on or about 24 December 2021, with the result that Aventus securityholders who elected to receive scrip in lieu of cash would receive Home Consortium Limited ("HCL") shares rather than HomeCo securities in consideration for their Aventus securities. He also noted that, by reason of that restructuring, the cash consideration payable in respect of the schemes would now be paid solely by HCL and addressed the process by which that would occur. By a second affidavit dated 15 February 2022, Mr Selim confirmed that HCL was the registered holder of specified Aventus securities and would therefore be an excluded securityholder for the purposes of the Company Scheme, and that no other member of the HomeCo Group held any Aventus securities, and he was not aware of any person holding such securities on behalf of or for the benefit of any member of the HomeCo Group.
6. AHL also tendered a letter dated 21 February 2022 from ASIC indicating that it had no objection to the proposed Company Scheme for the purposes of s 411(17)(b) of the Corporations Act and a conditions precedent certificate in respect of the satisfaction or waiver of conditions precedent, executed by AHL, ACL, HCL, Home Consortium Developments Ltd and HMC Funds Management Ltd as responsible entity of the HomeCo Daily Needs REIT.

The applicable principles and determination in respect of approval of the Company Scheme

1. Section 411(4) of the Corporations Act provides that an arrangement is binding if, at a meeting of scheme shareholders, it is passed by a majority of scheme shareholders present and voting (in person or by proxy) and by 75% of votes cast and it is approved by order of the Court. At the second Court hearing, the Court will first determine whether the procedural requirements in respect of the scheme have been satisfied and then exercise its discretion as to whether or not to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Ltd [2019] NSWSC 1679 at [15]. The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved and will have due regard to members' assessment of their interests as manifested in the voting at the scheme meeting, and will recognise that shareholders are generally "the best judges of whether an arrangement is to their commercial advantage", and will therefore "be reluctant to make decisions contrary to the views of security holders expressed at meetings": Re NRMA Ltd (No 2) (2000) 156 FLR 412; [2000] NSWSC 408 at [22]; Re Seven Network Ltd (2010) 267 ALR 583; 77 ACSR 701; [2010] FCA 400 at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5].
2. In the exercise of its discretion, the Court will generally have regard to whether scheme members have voted in good faith and not for an improper purpose; whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone might approve it; whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; whether there has been full and fair disclosure of all information material to the decision; whether minority shareholders would be oppressed by the scheme; whether the scheme offends public policy; and whether the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Re Seven Network Limited above at [35]-[40]; Re Aveo Group above at [15].
3. I am satisfied that the statutory and procedural requirements for the Company Scheme under s 411 of the Corporations Act have been satisfied. There is no reason to think that AHL has not complied with the disclosure requirements in s 412 of the Act in respect of the explanatory statement for the Company Scheme. The resolutions in respect of the Company Scheme were passed by a majority in number of members present and voting (either in person or by proxy) at the scheme meeting and by more than 75% of the votes cast on the resolution in accordance with s 411(4)(a)(ii) of the Corporations Act and there was a reasonable level of attendance at that meeting.
4. There is no reason to doubt that the Company Scheme is fair and reasonable in that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it, given AHL's shareholders' support for the scheme resolution; the AHL directors' recommendation that shareholders vote in favour of the scheme for the reasons given in the scheme booklet; the independent expert's opinion that the Company Scheme and Trust Scheme are in the best interests of securityholders, in the absence of a superior proposal; and the disclosures in the scheme booklet of the potential benefits and disadvantages of the schemes. AHL has tendered a letter from ASIC indicating that it has no objection to the scheme under s 411(17)(b) of the Corporations Act, and there is evidence that the conditions precedent to the Company Scheme (other than Court approval of the Company Scheme and the grant of the judicial advice) have been waived or satisfied. There is no reason to think that any other necessary matters have not been brought to the Court's attention.
5. I am satisfied that I should make an order under s 411(6) of the Corporations Act amending the Company Scheme to clarify that the Excluded Securityholder (as defined) is HCL, consistent with the approach taken by Barrett J to identify excluded shareholders by name in Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [6]-[7], followed in Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [14] and Re Isentia Group Limited [2021] NSWSC 1069 at [15]. I am also satisfied that I should make an order exempting AHL from compliance with s 411(11) of the Corporations Act, where the scheme will not modify any rights of shareholders or of creditors or of persons dealing with AHL: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]; Re Toll Holdings Ltd (No 2) [2015] VSC 236 at [18]-[19].
6. For these reasons, I made the orders sought by AHL in respect of the Company Scheme at the second Court hearing.

Judicial advice in respect of the Trust Scheme

1. The role of the Court in granting judicial advice at the second Court hearing is of a similar nature to that in company schemes under Pt 5.1 of the Corporations Act. An application for judicial advice that the responsible entity is justified in giving effect to and implementing a restructuring approved by unitholders can be brought before the Court once unitholders' views, expressed through voting at the relevant meeting or meetings, is known and any unitholder who wishes to appear to oppose the application is given an opportunity to do so: Re Mirvac Ltd (1999) 32 ACSR 107; [1999] NSWSC 457 at [48]; Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194; [2004] NSWSC 1197 at [10]. At the second hearing, the Court will consider whether the procedural requirements for the obtaining of the unitholders' approval have been satisfied, and the Court then gives considerable weight to the level of support for the proposed transaction, and to whether any person appears at the second Court hearing to express any opposition to it: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]; Re Commonwealth Managed Investments Ltd [2014] NSWSC 244 at [3].
2. ACL seeks orders under s 63 of the Trustee Act to the effect that it would be justified in giving effect to and implementing the transactions contemplated by the resolutions passed by unitholders at the Trust Scheme meetings. There is nothing to suggest that those resolutions should not be given effect or that ACL in its capacity as responsible entity of ARPF would not otherwise be justified in giving effect to those resolutions and the proposed transaction. For these reasons, I was also satisfied that I should also give the judicial advice sought by ACL as responsible entity of ARPF and I also made orders to that effect at the second Court hearing.

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